AHDR: oil dependency in the Arab World stifles innovation and production
Arab countries should emulate the success of the Asian Tiger nations by adopting a policy of “early and intensive investment in education, accompanied by sustained and rapid improvement of its level,” say the authors of the latest Arab Human Development Report 2003 (AHDR 2003).
Written by a distinguished group of Arab scholars and opinion leaders, AHDR analyzes the current state of knowledge in the Arab world. The report notes the damaging impact on the region’s knowledge base caused by excessive oil dependence and the accelerating emigration of educated professionals.
After the oil boom of the 1970s, most of the economies of the Middle East and North Africa either stagnated or declined. In the last three decades, the Asian Tigers, Hong Kong, Singapore, and the Republic of Korea, dramatically raised incomes and living standards, largely due to sustained investment in education and research, argue the authors.
By contrast, the income gap between Arab states and industrial countries has dramatically widened during the same period. Despite the popular perception that Arab countries are rich, overall gross domestic product (GDP) at the end of the 20th century was $604 billion, a little more than that of Spain at $559 billion, with less than 15 percent of the Arab population.
The report points to Jordan and Kuwait as countries that have relatively better educational systems and higher societal motivation for education, indicating the potential for progress elsewhere in the region.
According to the report, overwhelming dependence on oil extraction stifles innovation and production in the region. One of the main features “of the production pattern prevailing in Arab countries, which influences knowledge acquisition, is the overwhelming dependence on the extraction of raw materials chiefly oil,” the authors note. This rentier system encourages spending and acquisition, providing little incentive to stimulate local investment and production.
By contrast, creating indigenous knowledge requires time, effort and financial resources.“Almost all Arab countries have relinquished key knowledge-intensive aspects of oil production to foreign firms,” say the authors. “The consequences of this abdication are severe.”
Most production in Arab countries is based on traditional, primary commodities that do not require advanced skills or technology, while consumer goods are mainly produced under foreign franchise, a practice that “stimulates knowledge development abroad and stifles it at home.”
Excessive dependency on oil and other export commodities discourages broader international trade relationships and limits competition in the internal market, the authors add. “Resistance to opening up to the outside world by Arab economies and their lack of exposure to foreign competition, coupled with at times excessive protection for local products through import substitution policies, have also slowed the advancement of productivity and the employment of knowledge to that end.”
Oil dependence has also led to the excessive concentration and exportation of wealth. “Demand for knowledge has been weakened not only by faltering economic growth and productivity in Arab countries during the last quarter century but also by the over-concentration of wealth in a few hands,” the authors argue. “The vast amount of Arab capital invested in industrialized countries and, therefore, denied to the Arab world, is strong evidence that, in human development terms, it is not the possession of money and wealth that matters but how productively such wealth is invested.”
Sponsored by the United Nations and the Arab League, AHDR was released on October 20, 2003. The report is the second of a planned four-part series. Last year's report challenged the Arab world to overcome the severe and widening gaps in knowledge, political freedom, and women's empowerment. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
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